Dana Wagner has one of the most curious jobs at Google. As the internet giant's competition counsel, Wagner spends much of his time getting a new message across to anyone who'll listen: that Google isn't that great after all.
The problem for Google is a rare one for a company that's less than 11 years old, but can be summed up succinctly: its success is so great that it has attracted more than a little interest from antitrust authorities around the world. The crucial factor that could see this escalate into a problem for Google is that the search company is continuously inching closer to achieving its mission of 'organising the world's information'.
In the past few months alone, the Palo Alto start-up has launched a shiny new web browser in the form of Google Chrome; a challenger to Microsoft's Windows operating system in the form of Google Chrome OS; and a potential replacement for email in the form of Google Wave. All are products that Google sees playing a big part in its future. But it's the Silicon Valley giant's unrivalled supremacy in search marketing that threatens to curtail any plans of world dominance.
Enter Wagner with a 26-page presentation extolling the virtues of Google's fiercest competitors. In his presentation, Wagner urges a 'reality check on size' by comparing Google to its larger (in revenue) rivals AT&T, IBM, Microsoft and Verizon, and showcases the 'innovations and inventions' coming from search rivals Yahoo!, Microsoft and even Ask.com.
This type of behaviour can be attributed to a rare condition, let's call it 'antitrust syndrome', where a company becomes so enormously successful that it spends millions of dollars lobbying authorities with the message that its competitors are bigger than it is.
In the past Intel, Microsoft, AT&T and IBM have all come down with varying degrees of the condition following attention from antitrust authorities. The most famous example is the case of the US Department of Justice and 20 US states versus Microsoft, a lawsuit filed in May 1998. The central allegation was that Microsoft had won out in the web browser battle by bundling Internet Explorer with every issue of Windows. A ruling against Microsoft could have broken up the company, but a settlement was eventually reached in 2001.
And now, in the opinion of many, Google is well and truly in the crosshairs of antitrust authorities. An increase in lobbying budget and presentations such as Wagner's point to one thing: that the search giant is worried, and is prepared to stop at nothing to fend off attacks by competition regulators.
Skirmishes
US regulators are firing shots across Google's bow, but so far the search giant has managed to remain largely unscathed in a series of minor skirmishes.
The most recent of these saw Google chief executive Eric Schmidt resign from his Apple board position on 3 August. Pressure was mounting from the Federal Trade Commission over his dual role, but Schmidt thought it would be better to resign before things got too heated. Arthur Levinson, who is still on the board of both companies, is still likely to be investigated.
There's also the case of the US Department of Justice investigating Google, Yahoo!, Apple and biotech firm Genentech over allegations that the companies have an agreement in place not to recruit each other's employees.
The Justice Deparment has remained tight-lipped on the investigation but, if such a deal exists, the concern is that it could stifle competition and ensure the companies remain dominant forces in their respective sectors.
The reason these cases can be labelled skirmishes rather than full-scale battles is that neither ultimately attacks Google's central business model. They don't ask questions such as: is Google guilty of anticompetitive behaviour in maintaining its dominant market share in search?
Or does Google's expansion into browsers, operating systems, mobile and more threaten to increase its power? However, these are issues that regulators are quickly waking up to.
A close shave
What's easy to forget in light of Yahoo!'s search partnership with Microsoft is that Google and Yahoo! were ready to roll on a similar deal before Google suddenly pulled the plug.
The Justice Department was only hours away from filing an antitrust suit that would have questioned the deal on two points of law, according to Sandy Litvack, the lawyer hired to look into the deal.
Obviously Google was aware that the antitrust authorities were circling and saw it as a battle worth avoiding. And it was probably a sensible decision after the US Federal Trade Commission, under president George Bush, sent a strong signal that search marketing was very much on its radar.
"Internet search advertising and internet search syndication are each relevant antitrust markets and Google is by far the largest provider of such services, with shares of more than 70 per cent in both markets," the FTC stated at the time.
The main battle
In the light of this, the war on Google is now being fought across the world. There are around 200 antitrust organisations globally, and they are starting to ask questions of Google's market position.
"You've got a US attorney general keen to make their name in a high-profile case and you've got Google beginning to behave in ways reminiscent of Microsoft 10 years ago," says Paul Doleman, chief executive of iCrossing. "All of that adds up to real risk for Google, and it's pretty clear the search giant is aware of that."
Because of the tight-lipped nature of government organisations it is hard to predict exactly what moves they will make, but Google's competitors are working hard to persuade the authorities to take more affirmative action.
This is where ICOMP, or the Initiative for a Competitive Online Marketplace, comes in. Billed as an organisation set up to 'promote widespread support for principles that are essential to a healthy online environment', ICOMP is 100 per cent funded by Microsoft and made up of around 50 member companies in the digital industry.
One of these members, Tradecomet.com, has filed a lawsuit that gets to the heart of what Google's competitors see as a key battle. The company, which runs the business search engine Sourcetool.com, has levelled some pretty heavy accusations against Google.
'Google has refused to stop engaging in predatory conduct to block search traffic by imposing massive, unjustified price increases' is one. 'Google's anticompetitive conduct eliminated TradeComet as a competitor' is another.
Dan Savage, chief executive of Tradecomet, alleges that Google's 'ambiguous' quality score 'raised prices by 10,000 per cent' which, he claims, 'strangled' his business overnight.
The central allegation is that Google, as gatekeeper, is so powerful that it can make companies disappear overnight on a whim. ICOMP's legal counsel David Wood says that preferential treatment of advertisers is fine for small companies, but not when one holds a 'gatekeeper' role. This case, albeit Google versus a small company, is likely to deliver a landmark ruling. Should Google win, the pressure will be off, but should it lose, other companies will almost certainly take similar action.
ICOMP for its part claims no agenda against Google. The organisation says it just wants an open marketplace. The issue, argues Wood, is that Chrome the operating system and Chrome the browser will lock consumers into Google's search engine, giving it an unfair advantage.
Despite their ferocity, behind these individual cases lies a bigger question. Do governments have the will to intervene in areas where competing players see Google as overly dominant?
Politics comes into play
While the Bush administration made no secret of its intent to investigate the digital and search advertising markets, Obama's government has a strong following at Google, and many people predicted that it would take a lighter approach.
Google donated funds to Obama's campaign and the president himself stopped off at the Googleplex while jetting around the US drumming up support for his election campaign. While there, however, he committed the Democrat administration to investigating antitrust in the digital market.
More significant is Obama's appointment of Christine Varney as head of the Justice Department's antitrust division. Varney has a history of gunning for big corporations, representing Netscape against Microsoft in the late 1990s. More recently, she said: "For me, Microsoft is so last century. It's not the problem. I think we are going to continually see a problem, potentially with Google."
While there is no suggestion that the Justice Department will single out Google in particular, the evidence is there that the antitrust authorities are very much up to speed on the digital sector and increasingly willing to delve in.
Antitrust syndrome
And this is where Wagner's job as Google's main lobbyist becomes critical to the company's future success. Central to negating any allegations that Google is a monopoly or anything of the sort is the fact that competitors are just one click away. It's a compelling argument, and Wagner has evidence that it's true in practice. This includes an incident on 31 January this year, when a coding error meant that Google users received the message: 'This site may harm your computer' on all search results. Google claims that Yahoo! queries doubled over normal levels during this time, proving that people can choose another engine if they want to.
Meanwhile, at the search-marketing coalface, Warren Cowan, founder of Greenlight, shares a common view that Google has done nothing wrong. "Google is as big as it is because of a vacuum of innovation in search," he says. "It would be a shame to see it undone through anti-trust."
What the 'one click away' strategy doesn't address, however, is questions over Google's relationship with advertisers.
Google is adept at arguing that it accounts for a small share of overall ad revenue. Google's share of total ad revenues in the US is 2.66 per cent and 30 per cent of online ad revenue, according to Cowen & Cowen. But critics argue that it's the search market that counts, where Google has more than 80 per cent share in several markets, making it almost an essential buy for advertisers.
"There is nothing to lock advertisers into using Google's services," insists the search giant. "They'll only stick with Google if it's worth more than they spend."
Wagner's presentation has done the rounds and no doubt Google is working out new and more effective ways to deploy its $2 million annual lobbying budget. The bets are that this budget is likely to increase significantly as antitrust authorities continue to take more interest in digital.
The first battles have been fought. Google has won on some fronts and lost out on others. But with a keen Obama administration, live court cases and increased lobbying efforts from competitors, the war on Google has only just begun.
.jpg)
.jpg)